An article by my Cobden Centre colleague, Toby Baxendale, exploring whether manipulating the interest rate can create real wealth:
You often hear politicians and economic commentators say that we must have low interest rates to make sure the price of money is as low as possible to allow people to borrow and thus spend. This is very much the common view whatever your political outlook. The thought behind this is the Keynesian notion that one person’s spending is another person’s income. This is the famous circular flow of income. In a further article, I will address the latter notion. The first notion — whether cheaper money will make for greater prosperity — I will address now.
First of all, I would like to recap how we entrepreneurs create wealth.
Of course, those in debt want low interest rates and those saving want them high, but that is not the question before the country… read more here.
